Canadian natural gas exports took a sharp turn for the better in the opening month of the new sales contract year last November. Deliveries to the United States rose by 4.5% to 312 Bcf from 299 Bcf in November of 2001, according to records kept on the trade by Canada’s National Energy Board.

Average prices at the international boundary jumped by 37% to US$3.91 per MMBtu in November of 2002 compared to US$2.85 during the same month a year earlier. Export revenues climbed by 43% to US$1.2 billion from US$862 million.

The strong performance followed a weak 2001-02 contract year, when drops of 3.4% in sales volumes to 3.7 Tcf, 41% in prices to US$2.85 per MMBtu and 43% in revenues to US$10.6 billion ended a winning streak of 14 consecutive annual records.

Last November, Canadian sales increased across the biggest gas export destinations. In California the monthly volume rose by 10% to 48 Bcf. Shipments to the Middle West rose by 3.5% to 127.8 Bcf. Deliveries to the northeastern states rose 16% to 101 Bcf.

Prices fetched by Canadian gas in California gained 39% to US$3.51 per MMBtu in the opening month of the current contract year, compared to US$2.52 in November of 2001. In the Middle West, Canadian gas prices improved 40% to US$3.93 from US$2.80. On shipments to the northeastern states, prices gained 33% to US$4.18 compared to US$3.15 during the November opening to the previous, 2001-02 contract year.

Canadian industry analysts suggest conditions are ripe for the recovery to continue through the 2002-03 gas contract year. The drivers are said to include evolving supply-and-demand conditions, and not just tendencies to follow oil markets inflated by geopolitical anxieties. By FirstEnergy Capital Corp.’s count, U.S. natural gas production capacity dropped by a “precipitous” amount — possibly 3.3 Bcf/d — over the past year. The Calgary investment house suspects that demand in the U.S. has exceeded supply by two to four Bcf through the current heating season, causing the heavy draws on gas storage.

The stage is set for U.S. demand for Canadian gas to stay strong after the heating season, FirstEnergy adds. A dry winter in the western half of North America has left the Pacific Northwest and California facing prospects of limited hydroelectric power supplies because there is too little snow for spring melt to fill water reservoirs. Snow-pack levels in the western U.S. are about one-third lower than historical averages. FirstEnergy predicts “this will create a significant effect for gas-fired power generation in the region and support strong pricing in the Alberta natural gas market.”

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